TMI Blog1985 (2) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of rupee one per 100 sq. ft., subject to the minimum amount of ₹ 1,50,000/- per financial year. Provided that the aforesaid rate of Re. 1/- per 100 sq. ft. will be operative so long as the selling rate of unpolished, slabs does not exceed ₹ 10/- per 100 sq. ft. In the event of the selling rate going above this figure, the royalty per 100 sq. ft. shall be increased by 25% of the excess over ten rupees. It is common ground that at the time of the agreement no income tax, super tax or excess profits tax was leviable in the State of Kotah. The clause was perhaps introduced in anticipation of the introduction of the taxes. as income-tax had just then been introduced in the neighbouring State of Bundi. The State of Kotah ultimately became part of the State of Rajasthan and the Union of India. On April 1,1950, the Finance Act extended the Indian Income-tax Act, 1922 to Rajasthan with a result that income-tax became leviable in the territory which formed part of the erstwhile State of Kotah also. On June 2, 1952, the Government of Rajasthan served a notice on the Company cancelling the agreement (Exh. A) on the ground that it was against the public interest and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 70 of the Contract Act were attracted. The Court wanted the parties to produce relevant material to enable the Court to pass an appropriate decree. Both parties requested that time might be granted and thereafter filed affidavits and furnished other necessary material to the Court. After giving an opportunity to both the parties to produce further documentary evidence, arguments were once more heard and the Court proceeded to pronounce judgment. It was held that the agreement was void and the finding is not now in dispute before us. The High Court then considered the question as to the measure of compensation to which the State was entitled to be paid by the company under Section 65 of the Contract Act. It was held that for the three years preceding the suit, the State was entitled to recover reasonable royalty from the Company and not the profits earned by the company as a result of its quarrying operations as claimed by the Government. The Court fixed one rupee two annas per hundred sq. it. as reasonable royalty and on that basis concluded that the State was entitled to a sum of ₹ 2,73,484/- for the years from December 15, 1950 to December 15, 1953. The Court also found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout demur and invited the Court to adjudicate upon the question so that an appropriate decree might be passed. We do not, therefore, think that any objection to the relief granted to the parties on the basis of Section 65 of the Contract Act can be raised in these appeals on the ground of want of necessary plea. 3. The second and third submissions of Shri Lodha were that the measure of compensation under Section 65 should be the actual profits derived by the company and not the royalty which the State might have otherwise levied from the company and that the High Court was in error in ignoring the period subsequent to December 15,1953. He invited our attention to Section 65 of the Contract Act and urged that when an agreement was discovered to be void or when a contract became void, the person who had received any advantage under such agreement or contract was bound to restore it, or to make compensation for it, to the person from whom he received it. According to Shri Lodha the net profits earned by the Company during the relevant period was the advantage received by the Company under that agreement which under Section 65 he was bound to restore to the Government. It is diffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the restoring party had received under the Contract. As a result of the contract being void, the State could at the most recover from the contractor the value of the rough stone excavated from the quarries. But then it would have to make good to the company the expenditure incurred by the company in the quarrying operations and extraction of the rough stone. It is for that reason that the Court instead of involving the parties and itself in impossible and speculative calculations adopted the basis of royalty as the measure of compensation. Royalty, as is well known, is, in (he case of a lease of a mine, the payment reserved by the grantor proportionate to the amount of the demised mineral worked within a certain period. In a case like the present where the grantor is the State and the lease is for excavation of stone, the measure of the compensation payable to the grantor should be the reasonable royalty which the State would have otherwise received from the grantee. Had the grantee not paid a pie under the contract on the ground that the contract was void, he would in our opinion be liable to pay reasonable royalty for the excavated stone. In addition, he would also be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rate of ₹ 2/- per 100 sq. ft. of excavated stone on the basis that ₹ 1.50p. represented reasonable royalty and 0.50 paise represented reasonable compensation for the grant of monopoly rights. We find that though in 1956 the rate of royalty under the Mineral Concession Rules was fixed at ₹ 1.50p. very soon thereafter it was raised to ₹ 2.50p. We think that in the circumstances of the case, we may adopt ₹ 2/- per 100 sq. ft. as the reasonable rate of royalty and a sum of 0.50 paise as compensation for the grant of exclusive privilege. On that basis the amount of reasonable royalty for the period 1953-59, would come to ₹ 11,12,377 according to the statement furnished to us by Sh. Pai and the compensation for the grant of exclusive privilege would come to ₹ 2,78,097.25p. The result of our calculation would be that for the period 1950-53, the plaintiff would be entitled to get a refund of ₹ 7,84,539.60p. and for the period 1953-59, the plaintiff would be entitled to get the sum of ₹ 21,18,909.05 less ₹ 13,90,474. that is, a sum of ₹ 7,28,435. 6. Shri G.B. Pai, learned Counsel for the Company urged that the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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